If Biden Wins, Health Care Stocks May Rise, But Not as Much As With a Trump Second Term, US Bank Says

Uncertainty has been roiling the financial markets for much of this year as the
coronavirus and COVID-19 pandemic rages. Added to that uncertainty is the outcome of the presidential election—and health care and health facilities stocks are not immune.

"We see material upside to stocks across our sector if the ACA is upheld and Biden does not pursue an onerous/expansive public option," J.P. Morgan's Managed Care/Facilities research team said in a report on the 2020 election.

And Biden saying, "I won't take people's commercial coverage away" during the televised presidential debate last month is "a strong clue that election risk has become increasingly asymmetric to the upside," the report said.

In addition, the Democratic nominee's proposed expansion of the Affordable Care Act and Medicaid, as well as lowering the age for Medicare eligibility to 60 from 65, could benefit managed care industry players, according to the report.

Trump supports private health insurance in general and Medicare Advantage.

When it comes to the stock market, the presidency is a story all its own.

In the year following a presidential election, stock market returns tend to be slightly lower, U.S. Bank analysts found.

"It doesn't seem to make much difference which party takes office, but it does matter whether control of the White House changes hands," the report said.

If a new party has won the White House, stock market gains averaged 5 percent. Contrasted with years when a president is re-elected or if the same party wins control of the White House, returns were slightly higher at 6.5 percent, U.S. Bank reported.

Among companies active in Medicare Advantage that could potentially benefit from policies in a second Trump term policies are CVS Health Corp., known for its retail stores, whose stock is down year to date, managed care company UnitedHealth Group Inc., whose share price is up so far this year, and healthcare insurance company Humana Inc., whose share price has also increased this year.

Also known as Part C or MA Plans, Medicare Advantage, an alternate to original Medicare, is offered by private insurance companies approved by Medicare.

But just how much does a president influence stock prices and the value of investments?

Wes Crill, a senior researcher at Dimensional Fund Advisors, said elections play only a small role in considerations for investors looking to forecast where markets will go.

"If you're buying a share of stock on the stock market, you're buying shares of companies not of political parties." Crill said. "And companies are still looking for ways to be profitable. That's true no matter who is in the office."

Nevertheless, investors naturally consider the probability of who will win the presidential election and what they expect the outcome's impact will be on all business, whether the healthcare industry, technology or financial firms, for example, Crill said.

Events such as the global COVID-19 pandemic, the actions of other world leaders, inflation and interest rates, in addition to the president, affect market prices and investor returns, he said.

"Markets incorporate a lot of information from many, many sources about the future, and some of that information is expectations around things like presidential elections," Crill told Newsweek. "All of that we believe is incorporated into current market prices."

Crill said the influence of the president on the market is overestimated.

"We see that presidents have had little if any impact in terms of the market return not being positive," Crill said.

His firm's analysis of presidents, starting with each's election to their successor's election, from Herbert Hoover to Donald Trump, found that U.S. stocks have continued to rise long-term.

However, there have been presidents who left office with markets at a lower value than when they were elected. Hoover served during the Great Depression. Richard Nixon resigned in disgrace in the middle of his second term during a recession in 1974, and George W. Bush held office during the September 11 attacks and the Great Recession.

For example, stock investments worth $100 on November 8, 1988, the day George H.W. Bush was elected, were worth $173 on November 3, 1992, when Bill Clinton won, according to data compiled by DFA.

On November 4, 2008, investments worth $100 rose to a value of $266 on November 8, 2016, when Donald Trump was elected.

For Trump, stock investments worth $100 on November 8, 2016 increased in value to $159 as of June 30, 2020.

There seems to be consensus that the presidential election isn't the only thing influencing stock prices. A few variables can affect stock market performance after presidential elections. U.S. Bank reported last month on its analysis of presidential elections since the 1930s.

Among those is control of the Senate, which "is key to bringing about real changes in policy regarding taxes, spending and regulation," the bank's report said. As the chances of a Democratic sweep have grown, the change in the majority party could result in short-term market impacts, according to the report.

Tom Hainlin, national investment strategist at U.S. Bank, sees many market participants anticipating that if Democrats sweep there could be a tougher stance on drug prices, which could pressure the pharmaceutical and biotechnology industries, according to the report.